US Shares Poised to Prolong Rally on Fed Minimize Hopes: Markets Wrap

(Bloomberg) — US stocks are set to extend a powerful rally on Thursday after dovish Federal Reserve and Meta Platforms Inc.’s sales beat added fresh fuel to a rebound for technology companies.

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Futures contracts for the Nasdaq 100 and S&P 500 rose more than 0.5% after a surge in tech stocks led both gauges to their biggest gains since February in the previous session. Meta’s beat contributed to the buoyant mood, offering evidence that spending on artificial intelligence can translate into better returns for investors.

The bullish mood for US equities didn’t extend to Europe, however. The Stoxx 600 benchmark dropped 0.3% after mixed earnings reports from lenders and industrial stocks, with Societe Generale SA shares sent tumbling after its domestic retail unit continued to disappoint. Rolls-Royce Holdings Plc gained as much as 11% after lifting its profit outlook.

Traders are now watching Bank of England’s interest rate decision, the third major central bank meeting in two days. The monetary authority is expected to cut rates by 25 basis points, according to consensus forecasts compiled by Bloomberg.

Federal Reserve Chair Jerome Powell signaled on Wednesday that officials are on course to ease monetary policy next month unless inflation progress stalls. Changes in the Fed statement solidified a shift in tone among several policymakers, recognizing growing risks to the labor market.

“Powell’s comments last night were definitely positive for risk assets as they strongly hinted at a cut in September,” Pauline Chrystal, a fund manager at Kapstream Capital in Sydney. “With the US economy still resilient and confidence that inflation is returning to target, it pushes further out the risk of a recession.”

In Asia, the yen extended its rally following Wednesday’s rate hike before erasing the gains.

“The volatility of the yen has risen since the shifting Fed expectations after US CPI numbers on July 10,” said Societe Generale strategist Frank Benzimra. “The BOJ hike decision yesterday amplified the volatility. We see some carry trade starting to reverse.”

The dollar edged higher against a basket of currencies after recording its worst day since May on Wednesday. Treasuries yields advanced two basis points to 4.05%

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In commodities, oil extended gains after Iran reportedly ordered a retaliatory strike on Israel for killing a Hamas leader on its soil.

Corporate Highlights:

• Societe Generale SA posted surging trading revenue even as its domestic retail unit continues to disappoint.

• Rolls-Royce Holdings Plc raised its profit guidance for the year and said it will reinstate dividend payments.

• Barclays Plc said it will repurchase as much as £750 million of shares as Chief Executive Officer C.S. Venkatakrishnan makes good on his promise to improve the bank’s payouts to investors.

• ING Groep NV’s profit beat analysts’ estimates on growing fees, prompting the lender to increase its revenue outlook.

• Anheuser-Busch InBev NV sold less beer than expected in the second quarter, hurt by a downturn in demand in China and slow claw back of sales in the US following the boycott of Bud Light.

• Saudi Arabia’s biggest chemical company beat analysts’ profit estimates in the second-quarter, an early sign the industry may be recovering after a challenging downturn.

Key events this week:

• Eurozone S&P Global Eurozone Manufacturing PMI, unemployment, Thursday

• US initial jobless claims, ISM Manufacturing, Thursday

• Amazon, Apple earnings, Thursday

• Bank of England rate decision, Thursday

• US employment, factory orders, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.3% as of 8:32 a.m. London time

• S&P 500 futures rose 0.5%

• Nasdaq 100 futures rose 0.8%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index fell 0.6%

• The MSCI Emerging Markets Index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.2% to $1.0809

• The Japanese yen was little changed at 149.91 per dollar

• The offshore yuan fell 0.2% to 7.2447 per dollar

• The British pound fell 0.5% to $1.2796

Cryptocurrencies

• Bitcoin fell 0.4% to $64,298.51

• Ether fell 1.6% to $3,170.07

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.05%

• Germany’s 10-year yield declined two basis points to 2.28%

• Britain’s 10-year yield declined three basis points to 3.94%

Commodities

• Brent crude rose 0.7% to $81.38 a barrel

• Spot gold fell 0.2% to $2,442.54 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Divya Patil and Winnie Hsu.

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